Forex: CBN Takes Further Step to Crash Parallel Market Rate

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• Directs banks to fund port charges incurred by oil marketers

Obinna Chima

As part of efforts to further strengthen the value of the Naira on the parallel market segment of the foreign exchange (forex) market, the Central Bank of Nigeria (CBN) has directed that payments for port charges to the Nigerian Ports Authority (NPA) and Nigerian Maritime Administration and Safety Agency (NIMASA) by oil marketing companies should henceforth be accommodated in the official forex window.

The central bank issued the directive Tuesday in a circular titled, “Payment of Ports and Nigerian Maritime Administration and Safety Agency Charges by Oil Marketing Companies,” signed by its Director, Trade and Exchange Department, Mr. W.D.Gotring, a copy of which was obtained by THISDAY.

CBN explained that the initiative would help improve forex availability in the market, as well as address the challenges encountered by stakeholders in the maritime sector.
The two-paragraph circular stated: “In the continued effort to improve forex availability in the Nigerian forex market and ameliorate challenges encountered by critical stakeholders, payment for port charges to the NPA, NIMASA, etc, by oil marketing companies can now be accommodated by the CBN using Form ‘A’.

“Therefore, authorised dealers are directed to accept the request for payment of port charges from oil marketing companies and forward same to the CBN forex window.”
Throwing more light on the rationale behind the policy, a reliable central bank source said it was expected to lead to a further appreciation of the naira against the dollar on both the bureaux de change (BDC) and parallel markets.

“Before the central bank unveiled the latest circular, when oil marketers imported petroleum products, they were expected to clear these products. The NPA and NIMASA charge dollars to clear these products and most times the importers resorted to either the BDC or black market.

“But with what the CBN has done, the importers can now access dollars from the official market through their respective banks.

“So they are expected to fill the Form ‘A’ and submit to their banks. The banks would then submit the forms to the CBN for settlement,” the source explained.
He said by taking that huge amount of demand out of the BDC and parallel segments of the market, it was expected to further ease demand pressure and lead to the appreciation of the naira.

While the naira closed at N365/$ on the parallel market Tuesday, it closed at N363/$ on the BDC segment and N362.38/$1 on the Investors’ and Exporters’ (I&E) forex window.
However, the official exchange rate stood at N305.65/$1 Tuesday, while Nigeria’s external reserves was put at $31.222 billion as of August 8.

The I& E forex window has traded over $4 billion since it was established, with the naira making gains in the market.

The window, where buyers and sellers are free to agree an exchange rate, was introduced in April to attract foreign investors into the country and boost the supply of dollars.

CBN Intervenes with $364m

Meanwhile, the CBN Tuesday intervened in the interbank forex market to the tune of $364 million, in a bid to sustain liquidity in the market.

A breakdown of the intervention indicated that the retail Secondary Market Intervention Sales (SMIS) received the largest allocation of $264,192,252.95.
The CBN also offered the sum of $100,000,000 to authorised dealers in the wholesale window.

Confirming the figures, CBN sources said the Bank also received requests from authorised forex dealers on behalf of their customers, for which results will be released.

The central bank reiterated its resolve to converge rates in the market.
The CBN last week had intervened in the wholesale, SMEs and invisibles windows to the tune of $195 million.